NewChina’s Baosteel, Aurizon delays iron ore project in Australia at least 18 months

China’s Baosteel Resources and its partners have pushed out plans to develop a long-stalled iron ore project in Australia by at least 18 months in light of weak ore prices, rail operator Aurizon Holdings said.

Baosteel, China’s no.2 steel maker, and Aurizon took control of the West Pilbara Iron Ore project last year when they bought Aquila Resources for A$1.4 billion (US$1.1 billion), launching the bid when iron ore prices were around 75 per cent higher than now.

At the time they said they aimed to slash the estimated A$7.4 billion cost of building the mine, rail and port, and would make a final investment decision on the project in early 2016 to start producing ore in 2017 or 2018.

"Aurizon and the mine participants are mindful of the volatility in the iron ore market price since the completion of the takeover of Aquila Resources in 2014," Aurizon said on Monday in a statement to the Australian stock exchange.

The partners, including South Korean steel giant POSCO and commodities investor AMCI, are now targeting a final investment decision in late 2016, as they look to cut project costs further due to poor iron ore prices, Aurizon said.

"It’s a sign of the times. We’re in a very well supplied market," said UBS commodities analyst Daniel Morgan.